SR Spire Inc

Standard Register (NYSE: SR) today reported its fourth quarter and total year 2010 results. For the quarter, the Company reported revenue of $172.7 million and a net profit of $2.2 million, or $0.08 per share. The current year fourth quarter 13-week results compare to last year’s 14-week revenue of $184.9 million and a net profit of $0.9 million, or $0.03 per share. For the year, the Company reported revenue of $668.4 million and a net profit of $2.6 million, or $0.09 per share. The current year 52-week results compare to last year’s 53-week revenue of $694.0 million and a net loss of $12.4 million, or $0.43 per share.

“We have made great progress during the year to stabilize revenue, improve profits and manage cash toward break-even,” stated Joseph Morgan, president and chief executive officer. “As a result, we are entering 2011 a financially stronger and more focused organization that will take advantage of the emerging opportunities in those markets in which we participate.”

Results of Operations

Revenue comparisons to the prior year are not consistent given the extra week reported during the fourth quarter 2009. However, during the quarter the Company continued to see expansion of its customer base through new contracts and growth in priority solutions even including the extra week from the prior year.

Gross margin as a percent of revenue was improved to 32.7 for the quarter versus 31.9 in the prior year. For the year, gross margin was at 32.0 percent of revenue versus 31.8 percent of revenue in the prior year. Favorable LIFO inventory adjustments were $1.2 million for the current quarter and $3.8 million for the year. This compares to favorable LIFO adjustments of $1.9 million and $4.9 million for the fourth quarter and total year 2009. Continuous improvement initiatives allowed the Company to enhance gross margin despite lower revenue units.

Selling, general and administrative expenses are also not consistent given the extra week reported during the fourth quarter 2009. However, savings initiatives during the quarter continue to offset planned investments in technology, materials science, and key expertise to support our market development.

“All business units have shown great progress during the year in improving their operating profits,” noted Morgan. “It is encouraging to see that the investments we made previously to support these businesses are now beginning to provide the returns we had anticipated.”

Adjusting for pension loss amortization, pension settlement losses and restructuring and impairment charges, non-GAAP adjusted net income was $5.7 million, or $0.21 per share for the fourth quarter of 2010, compared with non-GAAP adjusted net income of $3.2 million, or $0.11 per share for the fourth quarter of 2009. On a year-to-date basis, adjusting for pension loss amortization, pension settlement losses and restructuring and impairment charges, non-GAAP adjusted net income was $15.5 million, or $0.54 per share compared with non-GAAP adjusted net income of $16.4 million, or $0.58 per share for the prior year.

Capital expenditures were $14.7 million for the year using a combination of $8.4 million in cash and $6.3 million through operating and capital lease agreements. In addition, the Company purchased the assets of Fusion Graphics, Inc. for $2.5 million during the second quarter. Pension funding was $24.0 million for the year. Non-GAAP cash on a net debt basis was $5.9 million negative for the year.

“We came short of our expectations for cash this year as our year-end receivables balance grew $13 million from the previous quarter,” commented Morgan. “On the upside, this has resulted in strong positive cash flow for the start of 2011.”

Conference Call

Standard Register’s President and Chief Executive Officer Joseph Morgan and Chief Financial Officer Bob Ginnan will host a conference call at 10 a.m. EST on February 25, 2011, to review the fourth quarter and year-end results. The call can be accessed via an audio web cast which is accessible at: http://www.standardregister.com/investorcenter.

Presentation of Information in This Press Release

This press release may contain information that is non-GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows where amounts are either excluded or included not in accordance with generally accepted accounting principles. The presentation of non-GAAP information is not meant to be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States. In particular, because our outstanding debt is borrowed under a revolving credit agreement which currently permits us to borrow and repay at will up to a balance of $100 million (subject to limitations related to receivable balances and letters of credit), we measure cash flow performance prior to debt borrowing or repayment. In effect, we evaluate cash flow as the change in net debt (total debt less cash and cash equivalents).

About Standard Register

Standard Register is a premier document services provider, trusted by companies to manage the critical documents they need to thrive in today’s competitive climate. Employing nearly a century of industry expertise, Lean Six Sigma methodologies and other leading technologies, the company helps organizations increase efficiency, reduce costs, mitigate risks, grow revenue and meet the challenges of a changing business landscape. It offers document and label solutions, technology solutions, consulting and print supply chain services to help clients manage documents throughout their enterprises. More information is available at http://www.standardregister.com.

Safe Harbor Statement

This report includes forward-looking statements covered by the Private Securities Litigation Reform Act of 1995. Because such statements deal with future events, they are subject to various risks and uncertainties and actual results for fiscal year 2011 and beyond could differ materially from the Company’s current expectations. Forward-looking statements are identified by words such as “anticipates,” “projects,” “expects,” “plans,” “intends,” “believes,” “estimates,” “targets,” and other similar expressions that indicate trends and future events.

Factors that could cause the Company’s results to differ materially from those expressed in forward-looking statements include, without limitation, variation in demand and acceptance of the Company’s products and services, the frequency, magnitude and timing of paper and other raw-material-price changes, general business and economic conditions beyond the Company’s control, timing of the completion and integration of acquisitions, the consequences of competitive factors in the marketplace, results of continuous improvement and other cost-containment strategies, and the Company’s success in attracting and retaining key personnel. Additional information concerning factors that could cause actual results to differ materially from those projected is contained in the Company’s filing with The Securities and Exchange Commission, including its report on Form 10-K that will be filed for the year ended January 2, 2011. The Company undertakes no obligation to revise or update forward-looking statements as a result of new information since these statements may no longer be accurate or timely.

THE STANDARD REGISTER COMPANY STATEMENT OF OPERATIONS (Dollars in thousands, except per share amounts)   Fourth Quarter     Y-T-D 13 Weeks Ended   14 Weeks Ended 52 Weeks Ended   53 Weeks Ended 2-Jan-11   3-Jan-10 2-Jan-11   3-Jan-10   $ 172,684 $ 184,853 TOTAL REVENUE $ 668,377 $ 694,016     116,207       125,863   COST OF SALES   454,796       473,446     56,477 58,990 GROSS MARGIN 213,581 220,570   COSTS AND EXPENSES 50,684 54,270 Selling, general and administrative 204,613 205,270 370 - Pension settlement losses 370 20,412 - 2,407 Environmental remediation (803 ) 2,513 - 326 Asset impairments - 1,176   243       748   Restructuring and other exit costs   1,733       11,513       51,297       57,751   TOTAL COSTS AND EXPENSES   205,913       240,884     5,180 1,239 INCOME (LOSS) FROM OPERATIONS 7,668 (20,314 )   OTHER INCOME (EXPENSE) (572 ) (273 ) Interest expense (2,189 ) (1,197 )   (536 )     35   Other (expense) income   (333 )     390   (1,108 ) (238 ) Total other expense (2,522 ) (807 )   4,072 1,001 INCOME (LOSS) BEFORE INCOME TAXES 5,146 (21,121 )       1,887       129   Income Tax Expense (Benefit)   2,503       (8,724 )   $ 2,185     $ 872   NET INCOME (LOSS) $ 2,643     $ (12,397 )       28,948 28,859 Average Number of Shares Outstanding - Basic 28,917 28,836 28,955 28,914 Average Number of Shares Outstanding - Diluted 28,944 28,836   $ 0.08 $ 0.03 BASIC AND DILUTED INCOME (LOSS) PER SHARE $ 0.09 $ (0.43 )   $ 0.05 $ 0.05 Dividends per share declared for the period $ 0.20 $ 0.20   MEMO: $ 5,507 $ 6,901 Depreciation and amortization $ 23,255 $ 25,044 $ 4,668 $ 2,844 Pension loss amortization $ 18,672 $ 14,598       SEGMENT OPERATING RESULTS (Dollars in thousands) Fourth Quarter Y-T-D 13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended 2-Jan-11   3-Jan-10 2-Jan-11   3-Jan-10 REVENUE $ 43,892 $ 50,857 Financial Services $ 175,677 $ 193,203   43,644       46,227   Commercial Markets   165,888       170,107   87,536 97,084 Total Commercial 341,565 363,310   66,315 70,357 Healthcare 250,963 265,850   18,833       17,412   Industrial   75,849       64,856   $ 172,684     $ 184,853   Total Revenue $ 668,377     $ 694,016     GROSS MARGIN $ 13,105 $ 14,791 Financial Services $ 52,244 $ 56,184   11,276       11,088   Commercial Markets   42,963       44,971   24,381 25,879 Total Commercial 95,207 101,155   24,771 26,230 Healthcare 91,926 96,475 6,112 4,950 Industrial 22,675 18,024   1,213       1,931   LIFO adjustment   3,773       4,916   $ 56,477     $ 58,990   Total Gross Margin $ 213,581     $ 220,570     NET INCOME (LOSS) BEFORE TAXES $ 2,438 $ 1,851 Financial Services $ 7,361 $ 7,914   (502 )     (2,090 ) Commercial Markets   (4,011 )     (3,981 ) 1,936 (239 ) Total Commercial 3,350 3,933   6,676 6,027 Healthcare 19,575 22,553 660 (355 ) Industrial 239 (1,304 )   (5,200 )     (4,432 ) Unallocated   (18,018 )     (46,303 ) $ 4,072     $ 1,001   Total Net Income (Loss) Before Taxes $ 5,146     $ (21,121 )   BALANCE SHEET     (Dollars in thousands)   2-Jan-11   3-Jan-10   ASSETS Cash and cash equivalents $ 531 $ 2,404 Accounts and notes receivable 122,308 108,524 Inventories 29,253 33,625 Other current assets   20,953       24,504   Total current assets 173,045 169,057   Plant and equipment 74,149 85,740 Goodwill and intangible assets 8,822 6,557 Deferred taxes 102,996 104,691 Other assets 10,819 13,676       Total assets $ 369,831     $ 379,721     LIABILITIES AND SHAREHOLDERS' EQUITY Current portion long-term debt $ 1,467 $ 35,868 Other current liabilities 77,296 77,349 Deferred compensation 6,306 7,699 Long-term debt 42,926 - Retiree healthcare obligation 4,931 7,425 Pension benefit obligation 185,174 202,146 Other long-term liabilities 6,883 7,080 Shareholders' equity 44,848 42,154       Total liabilities and shareholders' equity $ 369,831     $ 379,721         CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)     52 Weeks Ended 53 Weeks Ended 2-Jan-11   3-Jan-10   Net income (loss) plus non-cash items $ 48,128 $ 54,369 Working capital (4,112 ) 3,618 Restructuring payments (5,409 ) (9,872 ) Contributions to qualified pension plan (24,000 ) (20,600 ) Other   (2,819 )     (8,341 ) Net cash provided by operating activities   11,788       19,174   Capital expenditures, net (8,403 ) (8,844 ) Acquisition (2,464 ) - Proceeds from sale of equipment   359       634   Net cash used in investing activities   (10,508 )     (8,210 ) Net change in borrowings under credit facility 4,019 2,010 Principal payments on long-term debt (1,477 ) (159 ) Dividends paid (5,807 ) (11,026 ) Other   153       201   Net cash used in financing activities   (3,112 )     (8,974 ) Effect of exchange rate   (41 )     132   Net change in cash $ (1,873 )   $ 2,122     RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Dollars in thousands, except per share amounts)         Fourth Quarter Y-T-D 13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended 2-Jan-11   3-Jan-10 2-Jan-11   3-Jan-10   $ 2,185 $ 872 GAAP Net Income (Loss) $ 2,643 $ (12,397 ) Adjustments:   4,668 2,844 Pension loss amortization 18,672 14,598 370 - Pension settlement losses 370 20,412 758 1,074 Restructuring and impairment charges* 2,248 12,689 (2,302 ) (1,556 ) Tax effect of adjustments (at statutory tax rates) (8,454 ) (18,941 )             $ 5,679     $ 3,234   Non-GAAP Net Income $ 15,479     $ 16,361       $ 0.08 $ 0.03 GAAP Income (Loss) Per Share $ 0.09 $ (0.43 ) Adjustments, net of tax:   0.10 0.06 Pension loss amortization 0.39 0.31 0.01 - Pension settlement losses 0.01 0.43 0.02 0.02 Restructuring and impairment charges* 0.05 0.27             $ 0.21     $ 0.11   Non-GAAP Income Per Share $ 0.54     $ 0.58       GAAP Net Cash Flow $ (1,873 ) $ 2,122 Adjustments:   Credit facility borrowed (4,019 ) (2,010 )       Non-GAAP Net Cash Flow $ (5,892 )   $ 112     *includes impairment recorded in other income